Is another volatile week ahead for crude oil? It looks like it.
June West Texas Intermediate (WTI) crude futures plummeted $4.18, or 24.68 percent, to $12.76 per barrel to kick off the trading week. June Brent futures also declined $1.47, or 6.86 percent, to $19.971 a barrel.
U.S. crude rallied 50 percent after crashing 300 percent to below zero for the first time in history.
So, what is driving Monday’s dive?
It’s all about the storage facilities.
The Cushing tanks are filling up as they climbed ten percent in just one week. This comes as domestic inventories surged 15 million barrels, according to the Energy Information Administration (EIA).
The floating storage levels – oil supplies on ships in the ocean without a booked destination – are nearing full capacity, too.
Until demand recovers, it is going to be some time before a reduction in supplies catches up. OPEC and its allies agreed to slash output by 9.7 million barrels per day (bpd), while U.S. firms are beginning to curtail operations. It will not matter, though, because if the global economy is at a standstill, the crude inventories will just sit there.
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